Alan Whitehead
Main Page: Alan Whitehead (Labour - Southampton, Test)
Chris Heaton-Harris
It is as predictable as the wind. We know which direction the wind will come from and how fast it will be, which means we can predict a zone that will be affected by amplitude modulation on any given day. So yes, we can predict it.
I ask the Minister not to give up on the changes to the renewables obligation, which were part of a manifesto commitment, and to hear our plea about amplitude modulation. I have some concerns about the report she has commissioned from her Department and would like it judged against the evidence I have given her. Had the wind industry behaved more pragmatically and sensibly a few years ago, we probably would not be in this position. I am known for my views on this subject, but I know that there are sensible developers of wind technology who try to do their best for the local communities in the areas in which they install turbines. Unfortunately, I do not have an example of that in my constituency. It might be that the wind industry has woken up to this issue after the horse has bolted.
Dr Alan Whitehead (Southampton, Test) (Lab)
I rise to speak to our amendments 24 to 33 and 40 to 46, which, although standing individually, form a collective whole and refer to successive amendments the Government made to the Bill in another place in Committee to bring forward the closure date of the renewables obligation from 31 March 2017 to 31 March 2016. Our amendments would move that date and those of the various grace periods to 1 March 2017. They would therefore bring forward the closure date by one month, rather than one year, as is the present proposal.
I have some fears about the robustness of the present closure date in the face of the Bill’s passage. We are discussing a closure date that is very close to the day on which we are actually discussing it. The passage of the Bill, given that it came from the other place in the first instance, will have to finish in the other place shortly. The fact that the closure date before us is just a fortnight or so away from today creates considerable difficulties for the closure of the RO itself. It is not the case that we are discussing something that does not exist that can be brought into existence under legislation. We are discussing something that not only exists but, if we do nothing by way of legislation, will continue to carry on until 31 March 2017. We are discussing something that is in the legislation already, in that there is a specific mention in the Bill that the RO comes to an end on 31 March 2017, so if nothing happens to stop the RO carrying on, it will carry on until that date. In a sense, then, we have just one go in this place at changing the date in the legislation. If the Bill continues its passage through Parliament after the closure date has come into being, we will be dealing with retrospective legislation.
John Redwood
Is it not the case that from the moment people knew who had won the general election, they knew what would be Government policy in this area and they knew that it would be done as expeditiously as possible? Surely everyone could plan perfectly well around that obvious point.
Dr Whitehead
The right hon. Gentleman might have jumped the gun in respect of the point he wanted to make about the effect of the proposed closure, but it is a different point from the one I am making about the closure. My point is that we stand in danger not only with respect to investor confidence, investor certainty or other considerations about what investors should do, which I shall come on to in a minute, but in respect of what we do, potentially exposing this House to legal action. Although the Government will have closed the renewables obligation administratively, they will not have closed it legislatively. There could be difficulties if discussions here and in the other place mean that the Bill receives Royal Assent after 31 March 2016.
Mr Jackson
I hear what the hon. Gentleman is saying, but is there not an issue of fairness and social equity here? He is making a special plea on behalf of the renewables companies for what is effectively a de facto fiscal payment from some of the poorest consumers who are in fuel poverty to those individuals and those companies. Is that not the bigger issue, not least when we also have an electoral mandate to carry through this policy, as the hon. Gentleman is well aware?
Dr Whitehead
I shall come on in a few moments to the question of whether the Conservative party has an electoral mandate to carry through this particular policy. This is not the point I am making right now. My point is that we stand in some danger of making legal action available to those who do not want this RO to be closed. The hon. Gentleman might like to reflect on the fact that if there is a mandate, it is to get on and do it, but to do it properly, not incompetently, so that exposure to legal action can be avoided. The point about the fact that the RO is here, has been here for quite a long time and, as the legislation states, will continue until 31 March 2017—unless someone does something to stop that—is that, in principle, if no one does anything to stop it by 31 March 2016, then claims can still be put forward for receipt of an RO after that date, because that is what the legislation says. Although I do not think that in practice very many people would venture to seek certification of an RO after 31 March 2016 if we are still discussing this in the House, that possibility is nevertheless open.
John Redwood
Is the hon. Gentleman inventing a new doctrine: that Governments should never try and change the law because the Opposition might delay it?
Dr Whitehead
Again, the right hon. Gentleman misses the point I am making. This is not about the Opposition attempting to delay the imposition of the law. It is about the rush to close the renewables obligation on the part of the Government, not the Opposition, and the subsequent, rather dilatory way in which the Energy Bill was placed before this House—and, indeed, the way in which it has been scheduled in this House and the distinct possibility that further stages of the Bill may be scheduled. The net result of that dilatoriness in the legislative process is that the Government, not the Opposition, may put us in a position where retrospective legislation is apparently the case and the possibility of legal action is also apparently the case. It is important that we remember that today. One reason I am suggesting that the closure of the RO ought to be much later, albeit still early, is that it would avoid that potential legal action.
In reality, we know that the proposed closure of the renewables obligation a year early is not about implementing a manifesto pledge. The RO is not a new subsidy—that is what was in the Conservative manifesto. Indeed, we had discussions about that in Committee. The proposals before us are not only about putting an end to something that has been in place for a considerable period, that has worked well and that was about to change, in good time, to a new system that allows for degression in underwriting and a path towards effectively dissolving subsidies for a technology that has achieved close to market parity; they are about putting an end to something that industry investors were clear and confident about. Investors were confident not just because the renewables obligation had worked for a while; there was also a clear process whereby it would come to an end and a clear line of progression to contracts for difference—the new system, which we discussed at some length during the passage of the Energy Act 2013—and an orderly roll-out of renewable energy as something progressively more effective and cheaper.
Jonathan Edwards
In formulating his amendments, has the hon. Gentleman had time to consider the recent excellent report by the Select Committee on Energy and Climate Change, which said that the Government’s current policy would lead to bills increasing due to uncertainty?
Dr Whitehead
The hon. Gentleman is absolutely right to draw attention to that report and, indeed, to the issue that has arisen not just from these changes, but from a series of other abrupt lurches in policy from the Government in the field of renewable energy. The net result has been a dramatic drop in investor confidence and a dramatic fall from our advanced position as a country that was regarded as a safe, good place to invest in renewable energy. This policy lurch has led to a feeling among many investors that they are now living in a world of confusion, in which it may be recommended in the boardroom that—perhaps in light of the competitiveness of many other countries—they should invest elsewhere when it comes to renewables. It has thrown a great many programmes into confusion and affected a great deal of potential investment in this country, not just in onshore wind but in many other renewables. Policy lurches of this sort tend to creep and spread across confidence in other areas of investment. If things had been left well alone, it would have been possible to envisage the continued progression of a secure investment circumstance, along with a clear understanding of what investors were doing and of how investments would change over a period.
This is not about putting an end to new subsidies; it is about the removal of a well-understood, long-lived subsidy before the point at which investors, the market and everyone else had expected it to be replaced by another system. As late as the spring of last year—after, I imagine, the Conservative manifesto had been written—the Secretary of State announced that the renewables obligation would close in March 2017, and the changeover would then be undertaken. I think that that came as a particular surprise to investors and the market because the Government had previously seemed to be so confident that the procedure would be as it had been originally set out.
It has been claimed that the removal of the renewables obligation at an early date is okay because we are reaching one of our European targets relating to the proportion of renewable energy that should make up our overall energy mix by 2020. The claim is that because the component that is represented by wind, and particularly by onshore wind, is reaching its target, it is okay to throw the market into its current confusion. We must, however, bear it in mind that we are failing substantially on the two other components of our European 15% target, heat and transport. Incidentally, the United Kingdom can be fined for missing that target.
The target can be achieved through overachievement in some areas, even if there is underachievement in others. The 12% renewable heat target, on which we are failing fairly miserably at the moment, and the 10% renewable fuel target, on which we are also failing, could be supported by our continuing to deploy onshore wind in particular. It might be suggested that to cut onshore wind at this time, given the extent of the failure to keep up with the overall energy target, is irresponsible to say the least.
A further claim that we have heard during the Bill’s passage is that all this is being done to help the customers who will have to pay for the underwriting of onshore wind. Of course it is important for us to consider the bills that customers are paying when deciding how best to establish our energy mix for the future.
We will have to establish an energy mix that is the most affordable, the most secure and the least carbonising over the next period, but the claim that this change is being introduced to help customers is in reality paper thin.
If the Government were serious about renewables in general, as they claim, the hole left by onshore wind over the next period as a result of the early closure of the RO—estimates suggest that a loss of investment of £1 billion is on the cards, as the Select Committee has noted—would have to be filled by other renewable sources that are currently more expensive to underwrite than the onshore wind they would replace. The net outcome of this measure could well be that the cost to customers is considerably more than it would have been if the present arrangements had been allowed to continue to their conclusion.
Onshore wind is at the leading edge of market parity. As the Government will be aware, it was on a sustained glide path down to parity, with investor confidence high and costs coming down. I emphasise that the damage to investor confidence as a result of this essentially retroactive Bill will be enormous. If it goes through, it will effectively replace a steady path down to market parity in which competitive deployment could progress—a cliff over which investment will fall.
A further claim that the proposed change is necessary is connected to the levy control framework, the éminence grise in many of our discussions on energy, particularly renewable energy. It is a control framework formed in obscurity by the Government and continuing in background gloom as people attempt fruitlessly to find out about its calculations, its variations and its consequent prescriptions. The levy control framework was devised in 2011 by the Government to get us into a position where about £7.6 billion at 2012 prices of levy payers’ money—money derived not from Government sources but from levies on energy companies, which would pass those costs on to their customers—would provide a framework within which renewables could develop.
However, the levy control framework is based on a static endpoint—2020 in this instance—even though prices will be variable over the period. It is based on the idea of a strike price that renewable energy will receive and that has been agreed, certainly for onshore wind, at an auction process, set against a reference price, which is the median price for energy at a particular time. The strike price is considered in relation to what rewards will be undertaken for that renewable energy. When and if energy prices go down, the difference between the strike price and the reference price widens. Although a renewable energy developer will receive the same amount of money for their energy, the make-up of the amount paid to the developer will be different. The more prices go down, the less the developer will get in relation to the reference price and the more they will get in relation to the difference between the reference price and the strike price, which will come from the levy control framework. Therefore, over a period of time the levy control framework, as designed, increases the reward to those inside the system, even though they do not get a total additional reward. New entrants are squeezed out, because the money goes to rewarding those who are already in the system and less money is provided to new entrants outside the system. Indeed, many commentators consider the present form of the levy control framework to be, in essence, bust as far as new entrants are concerned. The relatively small amount of change that the levy control framework will undergo through the ending of the renewables obligation period a year early is all about how the framework balances itself, which is a pretty thin claim bearing in mind the range of theoretical headroom in the framework and the difficulties it has experienced.
David Mowat
A few moments ago, the shadow Secretary of State appeared unhappy that the capacity auction announced by the Government two weeks ago had been brought forward. Is the Labour Front-Bench position that the auction should not be brought forward?
Dr Whitehead
The question of whether the capacity auction should have been brought forward is secondary to the extent to which the Government believe that the auction will actually produce new capacity, as I am sure the hon. Gentleman is fully aware. Like the levy control framework, capacity auctions warrant a much deeper reorganisation than the rather tepid arrangement undertaken by the Government. Simply bringing an auction forward by a year, using roughly the same parameters about the likely clearance price and the distance between the clearance price and the likely price necessary to secure any new investment over a 15-year period for new gas-fired power stations, does not strike me as the smartest way to procure longer-term capacity in the capacity market. A deeper reorganisation of capacity auctions is required to secure that aim over the next period.
Before that intervention, I was briefly thinking about the subject of my amendments 23 and 52, to which I wish to draw the House’s attention. If the Government were serious about the proposals in their manifesto—that schemes that have local support should proceed—they should immediately adopt these amendments. They are about schemes where all the right moves in getting local agreement to the plans have been undertaken, all inquiries, concerns and planning arrangements have been dealt with, the schemes are on the cusp of getting agreement at planning and local authority level, and they have the support of local communities, but the Government have just pulled the plug on them and they now cannot proceed. The Government ought to adopt these amendments if they were, in principle, serious about their own principle that local areas should decide on local schemes and that those local schemes could be supported where local communities support them. Conversely, I fear that if clause 80 remains in the Bill, as amended, we will have in store a programme of onshore wind execution and not the execution of an onshore wind programme.
Labour’s vision is for a locally supported, appropriate programme of onshore wind deployment, complementing other renewables such as solar, biomass, offshore wind and tidal in reaching renewable targets, not because we have to, but because it is the right thing to do in ensuring that we have a balanced, low-carbon energy mix for the future. This clause points us squarely in the opposite direction and I urge hon. Members to support amendments that put us back on track again.
John Redwood
I rise to support the Government and to urge the rejection of amendments that would delay getting rid of the subsidies for wind power. Our country desperately needs more electrical power to be available, and I am pleased that the Government are now taking action, with capacity auctions, to try to get some more power available. We need more affordable power. We need to tackle fuel poverty and have power at prices that households can afford. We also need to have affordable power for extra industry, which is one of the Chancellor’s aims. We need reliable power; we want to know that the power is there whether the wind is blowing or not, and whether the sun is shining or not. People expect continuous power, in order to light and power their homes, and industry needs continuous power for its processes. On all those grounds, wind does not cut the mustard, and I am glad that we now have a Government who recognise that.
When the history of the past 15 or 20 years comes to be written, what the European Union is doing and what the previous Labour Government did on energy policy will go down as one of the catastrophic failures. It will be at least as big as the exchange rate mechanism, which destroyed so much activity, jobs and prosperity in our country. It may not be as big as the disaster of the euro, but it will be one of the big, classic disasters of the European Union that Europe as a whole is becoming an area of too little energy and very high-cost energy, driving industry out of the European Union area and into Asia and America, where more plentiful and affordable energy is available. Far from sparing the planet extra carbon dioxide, all this mad policy is doing is making sure that the carbon dioxide is produced somewhere else, rather than within the European Union itself.
Germany has much more wind power than we do and many Opposition Members admire it in this respect, but what happens when the wind does not blow? I will tell them what happens: Germany relies on a large number of extremely dirty coal power stations to churn out the electricity, producing more carbon dioxide than it would if it had opted for a fleet of modern gas stations in the first place. On average, that would have been better than this strange mixture of intermittent wind, which is very good on carbon dioxide when the wind blows, and back-up power, which in Germany and elsewhere in Europe is often generated from coal, and is extremely bad on carbon dioxide when the wind does not blow.
John Redwood
No, I have not had the chance to reflect on that, but it does not seem to be a very interesting observation given the fundamental truth that I have just given him, on which the hon. Gentleman has not reflected at all. The truth of our current energy policy—
John Redwood
Let me just deal with the hon. Member for Carmarthen East and Dinefor (Jonathan Edwards), and then I will happily deal with the shadow Minister. The truth about our energy policy is that the various interventions have conspired to make less power available at a much higher price and that, unless we start to reverse some of those interventions, we will get those pernicious effects. If he is saying that, yes, the price of energy from fossil fuels is variable, depending on the world market price, that is self-evidently true, but it does not mean that it is a good idea to put in something that is very unreliable and intermittent and is dearer than fossil fuel at more or less any realistic market price that might be commanded in the market by fossil fuel.
Dr Whitehead
Has the right hon. Gentleman had the opportunity to go to the national balancing services centre, which is in his constituency, as it undertakes a great deal of work balancing the system? There are substantial constraints on non-fossil fuel as well as fossil fuel inputs to the system, which cause shortages in power delivery at various stages, whether non-fossil fuel or fossil fuel delivery. Perhaps he could reflect on that in his comments.
John Redwood
Of course, as Member of Parliament for Wokingham, I have visited the centre on several occasions, and met the dedicated group of people there. The last time I visited was quite recently, and they were saying to me how much more difficult it is to manage a system that relies on wind, which is becoming more and more intermittent. That is self-evidently true. I am grateful to the hon. Gentleman for reinforcing my point, although I am not sure whether that was what he was trying to do. It used to be much easier when we had baseload power that could be relied upon and that was not interrupted by changes in the weather or the wind, and where the swing factor could be accounted for primarily by the pumped storage systems at Dinorwig. A command could be sent from Wokingham to Dinorwig. The water would come down the hill very quickly, and the kettles could boil in the interval of the big movie or whatever it was that was causing the surge in power demand. It is much more difficult now to call up power if, at the same time, the wind suddenly drops.
That is leading to our having to put in more and more interconnectors with other countries, so we become a net importer of power on a more regular basis, which is not something I value. I want us to have security of energy supply in our own country. We are, after all, an island of coal in a sea of oil and gas, and one would think we could find environmentally acceptable ways of exploiting that and burning it to produce the power we need. As I want an industrial revival in this country, that could well start with us importing less electricity.
David Mowat
The hon. Gentleman’s position strikes me as rather odd. I agree with him that the ETS status is important, that dumping is important, and that business rates are important, but, as is made clear in report after report—there is one from the aluminium industry in my office now—so are energy prices.
I do not think that I am making a massively controversial point. I am merely saying that in an industry that uses significant amounts of electricity, it is not a competitive advantage if our electricity costs more than other people’s. I agree with the hon. Gentleman that Chinese dumping is probably more significant, but we are talking about economics, and in economics everything happens at the margin. The stuff that I am talking about matters to our manufacturing industry. My central point is that if we are intending to have a march of the makers that involves a rebalancing of industry predicated on high electricity prices, it is going to be tough.
As I was saying before the hon. Gentleman’s interventions, the cross-European Paris INDC submission is about 50% less onerous than the requirements of our own Climate Change Act. When I first saw that statistic, I thought it odd. Why had we allowed this to happen? Given that we have a stringent, rigorous and, in many respects, very good process involving carbon budgets driving down emissions, and all that goes with that, why did we become involved, at a big world summit, in a European submission that was so feeble? Although the requirements of the European submission are so much lower than those of the UK, in terms of the Climate Change Act, it is not allocated by country, even now. I believe that that process will start this year, or perhaps next year.
My second point relates to the European emissions trading system itself. New clause 10 was deemed necessary because it was felt that the system was not acting as enough of a brake on carbon emissions. The European price of carbon—which is implicit within the system—is too low: it is about €5 a tonne, as opposed to the €23 a tonne or so that we are paying. In 2013, precisely that point was debated in the European Parliament. It was proposed, in an amendment, that the emissions trading system should be “re-baselined” in a way that would have made it meaningful. The amendment might have prevented the need for a carbon price floor in the UK, and created a carbon price that properly reflected where the market needs to be in order to drive actions. However, the European Parliament did not pass it, probably in response to the vested interests of big manufacturers in a number of big countries in Europe. I think that that was a pity.
As a consequence, here we are now, saying that the ETS is not fit for purpose, that the accounting that it implies—which was intended, in the Climate Change Act, to serve as a way of controlling generated power—does not work, and that therefore we are doing something different. However, the right answer is not to turn our back on the European system. I am a Conservative. I may be an “inner”, but only just. It is odd that those in the Opposition parties who are deeply committed to the European ideal should turn their backs on this European solution.
My third point is that there is no country-based reporting or control of emissions in Europe. Since 1990, Austria has increased its emissions by 13%, Ireland has increased its emissions by 7%, and Holland has kept its emissions static. During the same period, the United Kingdom has reduced its emissions by some 28%. If the European Union were serious about getting to grips with emissions, and getting to grips with individual countries that are tackling the problem, it would have addressed that fact.
My final point is that we are seeing dysfunctional member state behaviour. Germany and Holland are building brand-new coal-powered stations—lignite-burning stations. I believe that those countries not only do not engage in carbon capture and storage, but have made it illegal, which does not suggest that they understand the challenge that must be faced.
I have just been given a note saying that I should wrap up. Let me end by saying that, while there is no doubt that we all agree that climate change is a clear and present danger, we must bring the rest of the world with us, and by turning our back on arrangements such as the European emissions trading system and allowing the EU to put a submission to the Paris COP talks that is frankly feeble, we are doing the opposite. We will not solve the problem of global warming by fixing our 1.5% of total global emissions.
Dr Whitehead
I want to speak about new clauses that relate to a number of aspects of the Bill, and to the position in which we find ourselves in relation to a low-carbon economy for the future.
New clause 7 is very similar to new clause 3, and concerns an issue about which I think both Opposition parties feel very strongly: the need to develop a systematic strategy for carbon capture and storage. We have heard several references to what the Conservative manifesto at the last general election did or did not say, but the Government mentioned CCS in that manifesto. They also mentioned the least-cost routes to decarbonisation. Clearly—this is certainly the advice of the Committee on Climate Change—they will have to think carefully about CCS when they respond on the fifth carbon budget this summer, because CCS, among other things, represents a substantial implementation of least-cost routes to decarbonisation in the long term. The shameful pulling of the two CCS pilot projects mentioned by the hon. Member for Aberdeen South (Callum McCaig), in essence on the grounds of cost, represents a missed investment opportunity that could have reduced the cost of decarbonisation at a later date. That cost is an important element of our approach to a future CCS strategy. It is important to be clear that the cancellation of the projects does not and should not mean the end of CCS in this country.
Dr Whitehead
The right hon. Gentleman makes an important point. Indeed, a carbon capture strategy that sets out a longer-term route for our carbon capture and storage would play an important part in ensuring that investment for CCS was available. He also makes the point that the cancellation of those pilot projects has cast quite a pall over the future investability of carbon capture and storage projects, despite the fact that many such projects are now getting under way across the world.
It is important to reflect on how we will import the relevant technology under a new CCS strategy and how we might keep as much as possible of the rest of the supply chain and other CCS arrangements in the UK, particularly the substantial developments and intellectual property gained from the White Rose and Peterhead projects, which must be retained in the UK for use in future CCS developments. All of that should be part of a strategy, but we simply do not have one at the moment. Having a strategy in place would enable us at least to recover substantially from the immense setback caused by the cancellation of those pilot projects. The new clause calls for such a strategy to be articulated at an early stage and for us to be clear about exactly how and why we will keep CCS on track for the future.
We have heard about targets today, but new clause 8 does not set a new target. It relates to the undertakings in part 1 of the Energy Act 2013 relating to setting a target for the decarbonisation of the energy sector by 2030. Part 1 makes it clear that the Secretary of State has a duty to ensure that the carbon intensity of electricity generation in the United Kingdom is no greater than the maximum permitted level of the decarbonisation target range. There is a clear undertaking in the Act to set a decarbonisation target range and a requirement for the Secretary of State to take related actions.
As I have mentioned, that target already exists. It has done so since the Energy Act 2013 was passed. The outstanding issue at the time was not whether there should be a target but what the target range should be. Under the legislation, it is up to Ministers to clear up that matter through secondary legislation. It is not a particularly small matter: it is in the gift of Ministers to decide whether the target for decarbonisation is strong or not. During the passage of that legislation, it became clear that Members across the Committee envisaged the target being strong and in line with the aim that carbon reductions should make a proper contribution.
Unfortunately, during the passage of this Bill in another place, we heard about a letter to the Opposition from the Minister in the other place. In Committee, I quoted the Minister stating in that letter that
“a power was taken within the Energy Act 2013 which gives the Secretary of State the ability to set a ‘decarbonisation target range’ for the electricity sector, for a year ‘not before’ 2030. This allows a target to be set on the same date or after setting the Fifth Carbon Budget which must be set before end of June 2016 (measured in emissions intensity in grams of CO2 per kWh)…it is the intention of this Government not to exercise this power. This position is consistent with our manifesto pledge not to support additional distorting and expensive power sector targets.”––[Official Report, Energy Public Bill Committee, 4 February 2016; c. 206.]
Clause 8 does not propose an additional distorting target. It is a target that was included in the Energy Act 2013, and it is incumbent on the Government to take action on the decarbonisation target range through secondary legislation. It is extremely disappointing that the Minister in the other place indicated that the Government were not going to exercise this power. The new clause would require the Secretary of State to set a decarbonisation target and discharge section 1 of the Energy Act 2013. I am sure that, in the light of our discussions this afternoon, Members would agree that it is extremely important that such targets should be placed as waystations on our way to 2050. That is what the new clause seeks to achieve.
New clause 9 addresses an aspect of that decarbonised structure for energy in looking at the perverse results of the first two capacity auctions in not procuring any long-term new large generating plant; instead, almost the only long-term outcome was the procurement of diesel sets as generators. More than 1 GW of generators was procured, and they are more polluting than coal, which the Secretary of State has pledged to take off the system by 2025. The new clause adds to the 2013 Act’s requirements relating to fossil fuel-generating plant that is granted a 15-year capacity contract. That plant must adhere to certain conditions if the contract is to be granted. One of those conditions is the emissions performance standard. Section 57 of the Act contains a target or formula that, under subsequent secondary legislation, has led to a performance standard of 450 grams per kWh being established.
The new clause clearly does not seek to capture gas, because new plant for gas comes in at about 370 grams per kWh and is below the emissions performance standard. It refers to diesel coming into the provision of electricity, particularly in the context of what has happened in the two previous capacity auctions. Those diesel engines escaped the provisions of the 2013 Act because they were individually below the size at which plants were caught by the legislation. However, in terms of their individual emissions, they are among the dirtiest of the energy generation devices.
Diesel is exempt from present EPS levels because of the individual size of the reciprocating sets, and it has therefore cumulatively obtained a substantial proportion of long-term capacity payments coming into the system. Diesel sets have been able to get into the capacity auctions not because they are particularly cheap to run but because until recently they were already receiving a substantial underwriting from the Treasury through the enterprise investment scheme payments for the establishment of such plants. It appears that the payments were originally introduced to encourage the plants to be established for standby purposes, but they have of course been used for other purposes in the capacity auction. Although that route has been changed in the autumn statement, the most polluting generating plants have managed to get two lots of subsidies for generating and have got in through the capacity auction process as well. That is not only bad climate policy but bad public policy in general.
The question of diesel sets was discussed in Committee, and in a recent ministerial statement on changes to the capacity auctions, the Government undertook to look again at the matter. They suggested that this might happen through proposals to change the air quality regulations under the large plants directive, which might include diesel sets. However, they said that those changes might not occur until 2019 at the earliest, which would be too late for the next series of capacity auctions. The new clause seeks the most straightforward route to ensuring that diesel is not the perverse beneficiary of auctions as of now.
New clause 10 looks further forward, to the fifth carbon budget, but perhaps not quite so much further forward, in that we will have to decide on the fifth carbon budget by the summer. The new clause seeks to strengthen the Government’s intention to use their powers to ensure that we keep on track by outlawing the use of private trading sector credits at and after the fifth carbon budget. The hon. Member for Warrington South (David Mowat) made some valuable points about that.
Hon. Members will recall that when the Bill arrived in the House from another place, clause 80 sought to simplify the accounting of the UK’s carbon budgets under the Climate Change Act 2008. That clause was removed during the passage of the Bill in Committee. This new clause seeks a slightly different route to the goal of more effective carbon accounting in the fifth carbon budget and beyond. It seeks to make the Government directly accountable for emissions in the sectors covered by the EU emission trading system when determining whether the UK is staying within its national carbon budgets. The EU ETS covers emissions in the electricity sector and heavy industry, and the carbon accounting regulations currently allow the Government to ignore emissions from those sectors when determining whether the carbon budgets have been met. For that reason, the UK’s carbon budgets, as currently designed, fail to provide a framework that offers investor confidence in the UK power sector. In particular, it provides no assurance that the Government will put in place the necessary measures to ensure that the power sector is largely decarbonised by 2030 despite the fact that the Committee on Climate Change has repeatedly indicated that the power sector must reduce emissions to below 100 grams per kWh by 2030 in order to maintain a cost-effective trajectory to our 2050 climate target.
If the accounting rules are changed, the Committee on Climate Change has indicated that it will provide new advice on the appropriate level for the fifth carbon budget, and the committee will for the first time be able to recommend a budget that reflects a cost-effective pathway for UK emissions across the economy. The new clause differs from the original clause 80 in a key respect: while clause 80 prevents any carbon units in the EU ETS from affecting the UK carbon account, the new clause specifically prevents the carbon trading behaviour of private firms from affecting the national accounts, which is what allows the Government to ignore emissions from the ETS sectors. Under the new clause, the Government would retain the option of purchasing and cancelling ETS carbon allowances to offset UK emissions at state level, an environmentally preferable form of carbon-offsetting compared with the many types of international offset credits available to the Government. If exercised, the offsetting option would also strengthen the EU ETS.
Finally, amendment 47 reminds us of the first part of the Bill and the wide consensus for change regarding North sea oil. It seeks to give the Oil and Gas Authority new powers and oversight to ensure that decommissioning is used to best advantage in the North sea. Decommissioning should not operate in the short-term interests of those involved in it but in the longer-term interests of the co-operative use of infrastructure, which hon. Members have touched on, and for the benefit of not only the production of future, more marginal fields over the next period, but the future possible use of the North sea as one of the world’s finest repositories when carbon capture and storage gets under way. The amendment would add an important tool to the Oil and Gas Authority’s arsenal and I hope that the Minister will accept it.
Edward Miliband (Doncaster North) (Lab)
I rise to speak to new clause 11, which was tabled in my name, that of my hon. Friend the Member for Sheffield Central (Paul Blomfield) and those of Members from five other parties across the House. I thank the hon. Members for Westmorland and Lonsdale (Tim Farron), for Brighton, Pavilion (Caroline Lucas), for Beverley and Holderness (Graham Stuart), for Central Suffolk and North Ipswich (Dr Poulter), for Belfast South (Dr McDonnell) and for Arfon (Hywel Williams) for their support. I also thank my Front-Bench team and Baroness Worthington in the other place for her support and advice.
The new clause would insert the commitment to zero emissions in the Paris climate change agreement into our domestic law, with the Committee on Climate Change advising on when it should be achieved. It is the right thing to do and the science is clear: the world needs to get to zero emissions early in the second half of this century, and it is worth reminding the House of the debate’s context.
We know from recent scientific analysis that 2015 was the hottest year on record. The record for global temperatures has been broken in each of the past five months, with February’s record broken in shocking fashion. Atmospheric concentrations of CO2 are now higher—this is hard to get your head around—than they have been for at least a million years. That is what the scientists tell us and it highlights the necessary urgency, which is shared by Members on both sides of the House.
My proposal makes economic, moral and political sense. It makes economic sense because we have to get to zero emissions eventually. It will be tough, so we need to start planning now. We are already aware of some of the tools we will need, but not all of them. We need clean energy supplies, a revolution in the household sector and reforestation. As the hon. Member for Aberdeen South (Callum McCaig), who speaks for the SNP, said, we need carbon capture and storage to trap emissions. We will also need other technologies that are in the early stages of development. Crucially, we need to start the work now so that we can get to zero emissions at least cost. The economic case is proven by the support from the business community, and I thank Aviva, GSK, Unilever, Kingspan, Kingfisher and the broader “We Mean Business” coalition for their backing. The proposal also makes moral sense. Achieving zero emissions is necessary, so it would be irresponsible to pretend otherwise. Future generations will look badly on a generation that stuck its head in the sand and refused to plan ahead.
Andrea Leadsom
As the hon. Lady well knows, one transitional approach to decarbonisation is to move away from coal and towards gas as a bridge to a low-carbon future. She will also be very aware that new nuclear offers a low-carbon technology for the future, and this Government are committed to supporting that.
I appreciate the intent behind much of the hon. Lady’s new clause, but I hope that she can see why I cannot accept its specifics and that she will be content to withdraw it.
I turn now to new clause 8, tabled by the hon. Member for Wigan and others. This would require the Secretary of State to set a decarbonisation target range for the electricity generating sector. We debated very similar amendments in the previous Parliament, and during the passage of this Bill in the other place and in earlier Commons stages. The Government have made our position on this matter very clear. We are committed to ensuring that the UK continues to play its part to tackle climate change, in line with the Climate Change Act and our international and EU obligations. However, we want to do this as cost-effectively as possible in order to keep costs down for families and businesses while delivering on legally binding commitments. We cannot do that by locking ourselves into additional expensive and inflexible targets relating to the power sector. There are too many things we cannot predict about how the energy system will develop over the next 15 years and beyond. The costs of getting this wrong now would be picked up by families and businesses for decades to come.
I find it strange that Opposition parties often argue that we are not doing enough to tackle fuel poverty, and yet they are urging us to sign consumers up to a distorting and expensive power sector target. Investors want to know that we have clear, credible and affordable plans. The Government are now setting out the next stages in their long-term commitment to move to a low-carbon economy, providing a basis for electricity investment into the next decade. The huge investment we have seen so far is evidence that our approach is working. Between 2010 and 2014, our policies have secured an estimated £42 billion of investment in low-carbon electricity, including £40 billion in renewables, and we have more in the pipeline for the future. I therefore cannot accept this new clause, and I ask hon. Members to withdraw it.
I would now like to deal with new clause 9, tabled by the hon. Member for Wigan and others. This seeks to introduce additional capacity market eligibility criteria requiring any new-build capacity accessing 15-year capacity agreements to be made subject to the emissions performance standard, or EPS. As I have explained previously, the new clause does not achieve its intended aim, so I am surprised to see it reappear. The EPS sets an annual limit specifically on CO2 emissions from new fossil fuel plant with an output above 50 MW. Any new fossil fuel generators above 50 MW seeking to participate in the capacity market will already be subject to this limit, so nothing would be gained by introducing this as a further eligibility requirement in the capacity market. Existing generators, which form the majority of capacity market participants, cannot access 15-year agreements, so the new clause would also have no impact on those generators.
As I have set out before, the emissions impact from smaller generators that sit below the 50 MW threshold is often assumed to be larger than it is in reality. Small “peaking” generators have a relatively small impact on overall CO2 emissions due to the short hours that they run. These generators typically run for less than 100 hours a year, in the case of diesel engines, while larger fossil fuel plants will run for 2,000 hours or more. The new clause is therefore not effective, for the simple reason that the annual EPS CO2 emissions limit would be very unlikely to have any impact on small generators participating in the capacity market.
Dr Whitehead
Is not the proposal that the Minister herself is putting forward for the future inclusion of small diesel sets in air quality standards subject to exactly the same problem, in that smaller diesel set generators are brought into a scheme that was originally proposed for larger generators, thereby including them in the system? That is exactly what the new clause proposes through smaller diesel sets coming into an emissions performance standard that otherwise would apply to larger plants.
Andrea Leadsom
As I have explained to the hon. Gentleman, his new clause would not actually have that effect.
However, I am not complacent about concerns associated with local pollutants from small generators. I am very aware of the concern about diesel, in particular. Later this year, the Department will consult on options that will include legislation that would set binding emissions limit values on relevant air pollutants from smaller engines, with a view to having legislation in force no later than January 2019, and possibly sooner. These limits would apply to generators or groups of generators with a rated thermal input equal to or greater than 1 MW and less than 50 MW, irrespective of their number of hours of operation during any given year. This shows that the Government are taking appropriate action to avoid any disproportionate impact on air quality from smaller engines where those could contribute to harmful levels of air pollutants and the exceeding of existing air quality limit values. These limits, along with other proposals we have recently announced, send a clear message about the viability of developing and running diesel generators in future. I hope that hon. Members have found my explanation reassuring and will be content to withdraw their new clause.
I turn now to new clause 5, tabled by the right hon. Member for Orkney and Shetland (Mr Carmichael). This seeks to reinsert the clause added by the Opposition in the other place, once again rewriting the Oil and Gas Authority’s principal objective of maximising economic recovery of UK petroleum. This topic has been debated at length throughout the passage of the Bill. The Government successfully removed the previous iteration of this clause in Committee, with the support of Scottish National party Members. Importantly, I note that it was agreed across the room, including by Opposition Front Benchers, that diluting the focus of the OGA in such a way was undesirable. In light of this, I am surprised and rather disappointed that the right hon. Gentleman has tabled this new clause, not least because of the serious implications it has for jobs and growth in Scotland. As I have said many times, any amendment that detracts from the OGA’s focus on maximising economic recovery is damaging to the North sea. Such a move is unacceptable, particularly at a time of unprecedented challenge for the oil and gas industry.